Watchdog sees 19% jump in complaints

COMPLAINTS about banks and insurance companies surged 19% in the six months to September, the financial dispute handler said yesterday.

The financial services ombudsman, whose office was set up in April to take over the separate dispute resolution mechanisms that previously existed, said over 1,700 formal complaints were lodged by consumers and businesses that were unhappy with their banks or life assurance companies.

The new office was the first to be established on a statutory basis, giving it greater legal authority than the previous schemes, all of which were voluntary and had no legal backing as a result. The ombudsman can make awards of up to €250,000 which are binding on parties to a dispute. Decisions cannot be ignored by institutions or complainants and can only be overturned on appeal to the High Court.

The first set of decisions taken by ombudsman Joe Meade were made public yesterday. They included an award of €56,000 to an elderly couple who lost €93,000 after investing in a high-risk product that the ombudsman said should not have been recommended.

The couple, in their 60s, invested €127,000 but received just €34,000 when the investment matured four years later. One of the people involved had a severe disability.

“In these circumstances, the ombudsman felt that a high-risk investment was unsuitable and should not have been recommended by the provider,” the ombudsman said.

The institution involved had “largely failed in its duty of care” to consumers who had sought advice it and should have suffered the greater part of the loss involved, the ombudsman said. But he decided against an award that would have fully reimbursed the couple because he felt “they must be taken to have accepted a degree of risk to their capital sum.”

The Financial Regulator said yesterday it would investigate cases of mis-selling where it appeared that such practices were systemic within an individual institution or if the ombudsman referred practices that needed to be investigated.

The regulator’s British equivalent, the Financial Services Authority, has hit two Irish institutions with heavy fines for their selling practices in Britain.

Bank of Ireland handed over €235,000 in 2003 after a subsidiary was fined for mis-selling high-risk investment products, while an IFG subsidiary was fined almost €250,000 for shortcomings in advice provided to customers who were freeing up cash from their pensions ahead of their retirement.